The Bank of England is today expected to give borrowers some welcome breathing space after last month's quarter point interest rate rise.
Experts are predicting the Bank's policyholders will hold borrowing costs at 5.5% when the nine-strong Monetary Policy Committee (MPC) announces its decision later today.
A vote to keep rates as they are would come as welcome news for borrowers and homeowners, who have been hit with four hikes in interest rates since last August.
The predictions come as immediate inflation fears were calmed this week after a new survey gave indications of slowing prices in the services sector.
Figures from the British Retail Consortium also disclosed falling like-for-like sales in May as shoppers were put off by wet weather and previous rate rises.
But most economists expect that the MPC will act to raise rates to 5.75% in July as the Bank looks to bring Consumer Price Index inflation - currently at 2.8% - back towards its 2% target within two years.
Global Insight's chief UK economist Howard Archer said: 'It remains highly likely that interest rates will rise to 5.75% sooner rather than later, and we continue to favour a move in July.'
Members of the committee have expressed concerns over pricing confidence among manufacturers - despite the sector forming a small share of the economy - adding to inflationary pressure as well as strong demand growth, prospects for energy and import prices, and the degree of spare capacity in the economy.
Minutes of their May meeting also showed that they considered raising rates by 0.5% for the first time since Bank of England independence 10 years ago, before adopting a more cautious 0.25% increase to give more time to assess the impact of previous hikes.
Investec economist David Page, who also predicts the committee will opt for another rise in July, said rates were likely to peak at 5.75%.
He said: 'We do think that there are some signs that interest rate hikes are starting to bite on economic activity, which we suspect will rule out a rise to 6%.'
Bank to give borrowers beathing space
Posted - 07 June 2007 : 09:47:52
